The tax treaty of July 19, 1989 between France and the United Arab Emirates (signed July 19, amended December 6, 1993, decree 90-631) is the cornerstone of preventing double taxation between these two jurisdictions. Its application requires combined expertise of both tax systems.
The France-UAE Tax Treaty, signed on July 19, 1989, provides a framework for allocating taxing rights between the two states, which articulates with each state's domestic tax law to determine tax liability. Article 4 sets out tie-breaker criteria (permanent home → center of vital interests → habitual abode → nationality) to address dual-residency situations, though the practical effect of such allocation depends on the prior determination of residency under each state's domestic law. Correct treaty application requires first establishing residency under each state's internal law, then applying the treaty's allocation framework. The actual tax outcome depends on the applicable wording, the nature of the income, treaty residence and the domestic law of each State. Transfers of tax domicile to States that do not qualify as cooperative for assistance and recovery purposes (the UAE falls within this category) trigger specific French obligations under Article 167 bis of the CGI (exit tax) and Article 1649 A of the CGI (declaration of foreign accounts).
Signed at Abu Dhabi on 19 July 1989, the France-UAE tax treaty was published in French law by decree No. 90-631 of 13 July 1990 (approved by law No. 90-333 of 10 April 1990) and entered into force on 1 July 1990. It was amended by an avenant signed on 6 December 1993, published by decree No. 95-798 of 14 June 1995 (approved by law No. 94-881 of 14 October 1994), which entered into force on 1 June 1995.
The treaty applies to all tax residents of metropolitan France and the United Arab Emirates (federation: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, Fujairah). It does not apply to overseas territories or persons under special tax regimes.
The treaty prevails over French national law (article 55 Constitution) and Emirati law. When a treaty provision conflicts with internal law, the treaty takes precedence. This hierarchy is critical for optimal application of foreign tax credits and allocations.
Article 4 of the treaty provides tie-breaker criteria to address situations where residency is uncertain under each state's separate domestic law. These criteria articulate with the prior determination of residence under each state's internal tax law: the treaty does not redefine residency itself, but rather provides an ordering of criteria (tie-breakers) if residency is conflictual.
| Criterion | Priority Order | Application |
|---|---|---|
| Domicile (habitual residence) | 1 | Place where permanent housing available |
| Center of vital interests | 2 | Family, employment, social-economic ties |
| Habitual residence | 3 | Where habitually living, physical presence |
| Nationality | 4 | Reserved for complete tie-breaker |
Person with permanent housing in both France and UAE: tax residence = place of principal habitual residence. If equal, center of vital interests. If doubt: habitual residence = where physical presence longer. Burden of proof on taxpayer to document each criterion to authorities.
The treaty enumerates income categories and determines whether taxation rests with the source state or residence state. For each type, reduced rates or exemptions may apply.
Salaries, wages, compensation for employment. Tax: state where work performed (source state) except: temporary assignment < 183 calendar days = residence state. Tax rate: per source schedule. Foreign tax credit available in France for source tax in UAE.
Professional income: taxation in residence state unless permanent establishment (PE) in other state. PE = place of permanent exploitation: agency, office, workshop. Absent: no source state taxation. Present: source state taxes profits attributable to PE.
The France-UAE tax treaty should be presented primarily as a framework for allocating taxing rights and eliminating double taxation. For dividends, interest, royalties, capital gains and other sensitive income items, the practical effect depends on the exact qualification of the income, the treaty residence, the applicable wording of the treaty and the domestic law of each State. An article-by-article analysis remains necessary to determine the applicable taxation.
Article 13 provides for an allocation of taxing rights to the country where the property is located, subject to that country's domestic tax law. Immovable property in France: the allocation of taxing rights to France applies subject to French domestic law provisions. Immovable property in UAE: the allocation of taxing rights to the UAE applies according to UAE internal tax rules in effect. Other movable gains: generally the residence state of seller. Exception: shareholdings > 25% of capital = the source country of the asset may retain taxing rights under the substance principle, subject to applicable internal law provisions.
The treaty provides for conventional mechanisms for allocating taxing rights and eliminating double taxation. Their practical effect depends on the nature of the income, its qualification, the treaty residence and the circumstances of the case.
Foreign tax (UAE) on source income reported to France: may be credited against French tax calculation. Limit: credit cannot exceed French tax due on that income. Form 2047 attached to income tax return. Caution: strict ceiling; excess credit lost.
UAE tax residents exempted from personal income tax (0% IR). Income sourced France reported in UAE residence country but exempted local taxation. Major advantage for UAE residents. Corporate Tax 9% (above 375k AED): similar foreign tax credit method if corporate income sourced France.
Dividends/interest/royalties subject to treaty-reduced source tax: possibility to tax residence state if no actual taxation in source state. Example: dividend 10% rate, but source company exempt = income may be fully taxed in residence state.
Contrary to a widely held misconception, the material scope of the France-UAE Convention of 19 July 1989 (published in France by décret n° 90-631 of 13 July 1990) is not limited to income taxes. The taxes covered by the Convention, set out in its Article 2, include income taxes, wealth tax and succession duties, as confirmed by the French tax administration's published guidance (BOFiP, série BOI-INT-CVB-ARE). The practical articulation of these rules with each State's domestic law must be examined on a case-by-case basis.
The Convention allocates taxing rights over wealth (now limited on the French side to immovable property since the abolition of the ISF and its replacement by the IFI in 2018 — articles 964 et seq. of the CGI). Immovable property situated in France remains within the French IFI base for French tax residents, and for UAE tax residents to the extent of its French situs (article 964 of the CGI). The United Arab Emirates does not levy a wealth tax under its domestic law, so the allocation rule produces no actual UAE taxation.
The Convention contains specific provisions governing the allocation of taxing rights over succession duties. As a general matter, taxing rights over immovable property are allocated to the State of situs, while movable property is, as a rule, taxable in the State of the decedent's domicile, subject to the specific wording of the Convention and to the articulation with French domestic law (articles 750 ter et seq. of the CGI, together with Article 784 A of the CGI on credits for foreign succession duties). Because the United Arab Emirates does not levy succession duties under its domestic law, the elimination-of-double-taxation mechanism in this area is largely unilateral on the French side. The position on gift tax requires specific analysis: the scope of the Convention on this point is narrower and must be read in combination with French domestic rules (articles 777 et seq. of the CGI). A case-by-case analysis in light of the BOFiP guidance (BOI-INT-CVB-ARE) remains necessary.
Recent international tax developments — the OECD/G20 Pillar Two global minimum tax framework, the BEPS multilateral instrument and the OECD Common Reporting Standard — frame the application of the 1989 Treaty without amending its text. The UAE has implemented the Domestic Minimum Top-up Tax through Cabinet Decision No. 142/2024 (effective for fiscal years commencing on or after 1 January 2025) and is participating in the CRS automatic exchange of information.
OECD inclusive framework October 2021: minimum 15% corporate tax. UAE committed since 2023. Impact: if UAE company ≤ 15% effective rate per Pillar 2 rules = supplementary French tax possible. Treaty credits applied but on increased base.
The 1989 Convention (decree of publication n° 90-631 of 13 July 1990) contains neither a general anti-abuse clause, nor a Limitation on Benefits clause, nor a Principal Purpose Test in the BEPS Multilateral Instrument sense — the United Arab Emirates not being a party to the MLI for this Convention. The applicable anti-abuse framework is therefore drawn from French domestic law: tax abuse of right by fraud against the law (article L. 64 LPF) or arrangement with a principally tax-driven purpose (article L. 64 A LPF), together with targeted regimes such as article 123 bis CGI on entities interposed in low-tax jurisdictions. The EU Anti-Tax Avoidance Directive (Directive (EU) 2016/1164, "ATAD") does not apply to the United Arab Emirates, which is a third State to the European Union; ATAD only binds entities subject to corporate income tax within EU Member States. For UAE-expatriate structures, the analysis focuses on effective tax residency (article 4 B CGI), economic substance, and the combined application of the bilateral treaty with French general-law anti-abuse rules.
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